Bhagwati Prasad Khaitan Versus The Special Director

1977 (7) TMI 114 - CALCUTTA HIGH COURT

Dated:- 11-7-1977 - S Mukharji, J. ORDER Sabyasachi Mukharji, J. 1.In this application under Article 226 of the Constitution the petitioner challenges a notice dated the 25th September, 1975, issued to the petitioner under Foreign Exchange Regulation Act, 1947. 2. The petitioner is ;a director of the Hindusthan Motors Limited. He is also a Solicitor of this Court. By the said notice the petitioner was required to show cause why adjudication proceedings contemplated by Section 51 of the Foreign E .....

k Limited for the purchase of forward foreign exchange equivalent to ₹ 1.25 crores at the rate prevailing on the date of the said contract. If was, further, alleged that the said contract was entered into by the said company with the said Bank against its outstanding orders for import of raw materials, Bedford Trucks in CKD condition and components for which the said company had been granted import licences. It was alleged that there was violation of the provisions of the said Act by the s .....

Bank V. Director, Enforcement Directorate, 1977 (1) Cal LJ 292, Mr. Justice Mukherjee has held that the said contentions could be agitated in the adjudication proceedings and, therefore, it was premature at this stage to go into the validity of the said contentions. He has accordingly discharged the rule nisi. In the instant case on behalf of the petitioner the same contentions were again raised before me. It was, further, argued however that the petitioner, who was a director, had been sought .....

was mostly signed by Shri %.. P. Sonthalia, an officer of the said Company and in a few cases by certain other officers of the said Company who signed for K. P. Sonthalia ; And Whereas the said conversion was made on the basis of the forward exchange contract No. 130/66 booked by the said Bank on 4-6-66 at the request of the said company contained in a letter dated 4-6-66 signed by Shri R. P. Jhunjhun-wala, Vice-President of the said Company ; It further alleged- And Whereas the said R. P. Jhun .....

mmitted by the said Company, S/Shri B. M. Birla, Kasturbhai Lal Bhai, Badri Das Goenka, B. P. Khaitan, A. Pamaswari Mudaliar, Dhirendra Nath Mitra. M. K. Valloidi, Rasesh M. Mafatlal and Khan Bahadur C. B. Taraporvala were the Directors and Shri S. L. Bhattar was the President of the said company ; And Whereas it appears that the aforesaid Directors and the President who were in charge of, and were responsible to, the said company for the conduct of the business of the said company, have contrav .....

t from the officers, who have been specifically, mentioned, namely Shri R. P. Jhunjhun wala, Shri W. D. Jones, Shri K. P. Sonthalia, the said notice was issued to the other directors as well the petitioner on the ground that they were the directors of the company. In case of offences by companies, the vicarious liability of the officers and directors of a company for offences committed under the Foreign Exchange Regulation Act, 1947, arise Under Section 23-C of the said Act, which is to the foll .....

s that the contravention took place without his knowledge or that he exercised all the due diligence to prevent such contravention. 23-C. (2) Notwithstanding anything contained in Sub-section (1), where a contravention under this Act has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the Company, such director, manager, sec .....

ge of or was responsible to the company for the conduct of the business of the company. This provision of the Act fell for consideration by the Supreme Court. As to the meaning of the "person in charge and responsible for the conduct of the affairs of the company" in the case of Giridharilal Gupta v. D. N. Mehta , the Supreme Court held that the director simpliciter as such can not be said to be the person who was in charge of and was responsible to the company for the conduct of its b .....

behalf of the respondent that the aforesaid decision of the Supreme Court was in respect of a criminal trial. It was, therefore, urged that the ratio of the said decision would not be applicable in the instant case, I am however, unable to accept this contention. It is true that the construction of Section 23-C and the effect thereof fell for consideration before the Supreme Court In a criminal case. But the effect of the construction will be valid for all purposes. 3. It was, then, contended o .....

jury that the petitioner is complaining is the injury of being exposed to an adjudication proeeding where on the face of the proceeding or on the notice issued, there is no cause to adjudicate under the law. If the petitioner was complaining of improper adjudication, the adjudication provided by the Act would be sufficient remedy for the injury of improper adjudication. But there is no remedy provided for the injury of being exposed to an adjudication proceeding without any material or without a .....